Another one bites the dust: Guardian abandons LTCI

By Christina Pellett

Agent's Sales Journal (Summit Business Media)

On Monday, the long term care insurance world received news that yet another carrier would be leaving its midst by the end of 2011: Guardian Life Insurance Company of America, which has sold individual LTCI through its Berkshire Life Insurance Company of America unit since 2004, has reviewed its position in that market and has decided to abandon it in favor of its core life and DI business.

At first blush, this has little to nothing to do with independent agents. Yes, this is the second carrier within months to shutter its LTCI business. And yes, John Hancock and Genworth individually made announcements that they would raise rates on in-force policies. John Hancock even made its own exit from the group LTCI arena. Yet as a captive company, Guardian’s actions really only affect its career agents, most of whom probably won’t care anyway. This simply heralds a normally focused company’s exit from what amounts to a short-lived experiment.

Or does it?

Industry experts say that all of the recent LTCI market turmoil has been a result of early pricing missteps: Carriers miscalculated just how many people would actually need benefits through these policies. I guess they figured that most people would bail on their premiums or die before they actually needed care.

But the industry seems to have done too good of a job marketing the need for these policies. It also did too good of a job publicizing that younger applicants would pay a lower amount for coverage, urging the under-50 set to snap up long term care coverage before their health deteriorated and rates skyrocketed. If greater numbers of younger consumers are entering the system and paying comparatively less for coverage, how much money will there be to go around once the older policyholders start entering nursing homes and hiring home health aides?

I have to wonder how much of this activity might come from sheer panic for what awaits company coffers once baby boomers start actually using the long term care coverage they purchased just as it was gaining traction. In other words, is all this rate hiking and market exiting reactionary, or preparatory?

Whatever the background, and however justified the exit, if this continues, your clients will have fewer and fewer options for coverage at the time that the need for long term care continues to become greater and greater. It’s doubtful that fewer companies will mean fewer competitors for you, but it may mean less flexible options and less attractive pricing models. Producers on such sites as insurance-forums.net debate the future of long term care insurance (Traditional LTC? Worksite? Combination policies?) and industry advocates also tout a variety of long term care flavors as being the Next Big Thing.

One thing is for certain: Unless the major players remain in the market and continue providing coverage options for tomorrow’s long term care patient, we may be facing an entirely different health care crisis in 30 to 40 years.